The 1031 exchange used to be a relatively simple tax deferral strategy for taxpayers who wanted to defer the payment of their income
tax liabilities from the sale of investment property. Unfortunately, the 1031 exchange continues to become more complicated and difficult with each and every ruling published by the Internal Revenue Service.

It can be a major challenge for taxpayers to ensure compliance with all of the income tax codes, regulations and rulings. We created this 1031 exchange quick reference guide to help you navigate through your 1031 exchange transaction.

1031 Exchange Structures

First, you need to decide what type of 1031 exchange structure is most appropriate for your situation. Here is a quick summary of the
1031 exchange structures that are at your disposal.

Simultaneous or Concurrent 1031 Exchange - The relinquished property and the like-kind replacement property close at the same time.

Forward or Delayed 1031 Exchange - The relinquished property closes first and the like-kind replacement property is acquired later
within the prescribed deadlines.

Reverse 1031 Exchange - The like-kind replacement property is acquired and "parked" by the 1031 exchange Qualified Intermediary
first, and then the relinquished property is subsequently sold within the prescribed 1031 exchange deadlines.

Build-to-Suit (Improvement or Construction) 1031 Exchange - Your 1031 exchange proceeds from the sale of the relinquished property
are used to acquire like-kind replacement property and improve the replacement property.

Personal Property Exchange - Personal property can also be exchanged for other personal property of like-kind or like-class.

1031 Exchange Qualifications

Second, we need to make sure that your 1031 exchange is properly structured and complies with the applicable tax codes, regulations
and rulings. The following sections cover the key issues that you must be aware of.

Qualified Intermediary – Select your Qualified Intermediary ("QI") and assign your QI into your relinquished property (sale) transaction
before the transaction closes in order to preserve the tax-deferred benefits of the 1031 exchange.

Qualified Use Property – Your relinquished property (sale) and your like-kind replacement property (purchase) must be held for rental or investment or used in your trade or business in order to qualify for 1031 exchange treatment. You must have the intent to hold the
properties for investment. Properties held for sale will not qualify for 1031 exchange treatment.

Like Kind Property – The like-kind replacement property acquired in your 1031 exchange must be "like-kind" to the relinquished property sold. ANY kind of real property is like-kind to ANY other kind of real property as long as they are both held for rental or investment or
used in your business. Like-kind does NOT mean condo for condo or apartment for apartment.

1031 Exchange Reinvestment Requirement

Trade Equal or Up In Value – You must exchange equal or up in value based on the net sales price and total purchase price so that the
total purchase price of your like-kind replacement properties is equal to or greater than the net sales price of your relinquished properties.

Reinvest 100% of Net Proceeds – 100% of your net proceeds or cash proceeds generated by the sale of the relinquished property
must be reinvested into like-kind replacement property. Cash can be pulled out, but it will always be taxable.

Obtain Equal or Great Debt – The difference between the total purchase price(s) and the net proceeds reinvested in the like-kind replacement properties will always be the correct amount of new debt to place on the acquired properties, unless you wish to put
more cash into the transaction and obtain less debt.

3-Property Rule – You may identify up to three (3) potential like-kind replacement properties, without regard to their fair market value.
The limit is on the number of properties.

200% of FMV Rule - You may identify any number of potential like-kind replacement properties, but the total fair market value identified cannot exceed 200% of the fair market value of the relinquished (sale) properties. The limit is on the fair market value of the properties.

95% Exception – You may identify as many like-kind replacement properties as you want, but you must actually acquire and close
on 95% of the fair market value identified.